Angola Monetary Policy March 2021

Angola: Central Bank maintains key interest rate in March, but hikes secondary rate

The Monetary Policy Committee of the National Bank of Angola (BNA) maintained its basic reference rate at 15.50% at its 29 March meeting. The rate has been stable since 24 May 2019. In addition, the Bank maintained the interest rate on the standing lending facility at 0.50%, but raised the interest rate on the permanent liquidity absorption facility with a seven-day maturity to 12.00% from 7.00%.

The Bank’s decision to tighten its stance somewhat came amid persistent price pressures, even though there has been stability in the foreign exchange market and liquidity combined with contained aggregate demand: Inflation accelerated in February due to greater price pressures for food and non-alcoholic beverages.

The press release was void of explicit forward guidance regarding further rate movements, with the Bank omitting the statement from the previous meeting that it would aim for inflation of no more than 18% and monitor all monetary factors impacting price pressures. This year, our panelists expect the Bank to cut its key policy rate somewhat to help the economy regain further momentum in the wake of the pandemic-induced contraction. However, inflation is expected to remain elevated, limiting the Central Bank’s room for maneuver.

Commenting on the outlook for inflation, Gerrit van Rooyen, economist at Oxford Economics, added:

“Inflation will remain elevated due to the kwanza’s depreciation. The increase in consumer prices will reduce real incomes and impede personal consumption. The protracted economic depression has also resulted in higher unemployment, which further reduces total consumer spending power. […] The depreciation will continue to put upward pressure on consumer prices, owing to Angola’s heavy reliance on imported goods. The CPI will also face pressure from rising global energy and food prices in H1 2021 as well as increased taxes on consumer goods.”

The next monetary policy meeting is scheduled for 28 May.

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